Alaska's dividends help make us equal and protect our common wealth

The people who created the Alaska Permanent Fund dividend never intended it as play money or a simple giveaway. It had serious purposes, it has worked and it is too good to throw away now.

Gov. Jay Hammond believed in giving everyone an equal share in Alaska's wealth. He thought individuals would spend money more wisely than government, and he wanted some oil money to go to rural Alaska, not just Anchorage construction contractors and other fat cats.

That means we have public golf courses, not country clubs. We have good public schools and few private schools. We don't have ghettos.

The dividend isn't the only reason, but it helps a lot. Based on 2013 income figures from the census, last year's dividend provided 19 percent of income for Alaskans in the bottom half of earners (including children). For the top 10 percent, it provided about 2 percent of income. Those numbers come from a rough analysis by Matt Berman of University of Alaska Anchorage's Institute of Social and Economic Research.

The dividend has also helped save Alaska from wasting resource wealth, as many nations have done, according to the book "Alaska's Permanent Fund Dividend," edited by Georgetown and University of Maine professors Karl Widerquist and Michael Howard.

"All political communities have substantial amounts of common resources," they wrote. "But rather than treating them like a common stock, most governments give these resources away for free to privileged individuals and corporations."

When Hammond first pushed for the dividend, few understood or supported the idea. Hammond's dividend bills languished in legislative committees through the first six years of his time in office, even after the Permanent Fund itself was created in 1976. He won the dividend only through sheer political muscle.

During the 1980 session, Hammond's old friend, Clem Tillion, was Senate president. Plotting strategy at Tillion's house in the evenings, they settled on a plan that worked. Tillion told senators individually that Hammond would veto their pet projects if the bill didn't move. The threats got the bill passed with little discussion or public attention.

That original law would have given additional dividend shares for each year of residency after 1959. By now, a person like me, here since 1966, would be receiving 50 times more in dividends than a newcomer. After the U.S. Supreme Court rightly struck down that law, a backup bill that had passed in 1982 went into effect. It was designed to be as simple as possible, since Hammond was leaving office and without him the concept would die. That's the law that gives us equal dividends today.

The only legal expression of the dividend's purpose was in the 1980 law. (Purposes in the 1982 law all got deleted in committee to defuse controversy.) The dividend's two-part purpose is to share resource wealth with citizens "belonging to them as Alaskans," and to create public support and vigilance to protect the fund.

It worked. One of Gov. Bill Sheffield's first proposals after he was elected in 1982 was to repeal the dividend and use the fund's earnings for capital projects and a longevity bonus for elders, and he had plenty of legislative support in the 1983 session. The public came unglued. People had already cashed that first $1,000 check.

The fund has been a sacred cow ever since.

This history matters now, because Gov. Bill Walker's fiscal plan calls for reducing the dividend and changing how it is paid, to take the money from oil royalties rather than from the Permanent Fund. The fund's earnings would be used instead for government operations.

Walker has said he wants the plan to be fair, but the administration made no effort to study the impact of the changes or how large the dividend cuts or taxes should be.

"These were kind of random numbers about how much we needed," said Commissioner of Revenue Randy Hoffbeck. "There was no analysis on what the economy could bear or anything else. There was just a mathematical exercise about what would balance the budget."

Hoffbeck says the plan was written as a starting point for discussion. ISER is working on an economic analysis under a state contract. But this will come frighteningly late in the game, considering the pressure to adopt a plan by April that will set the course of Alaska's economy for generations.

In my next column, I'll address the political showdown we are facing, a four-sided standoff between those who are affected most by dividends, state services, oil tax credits or potential new taxes. Any plan will create winners and losers among these four groups. A successful plan would make everyone sacrifice together fairly.

But for now, I just want to point out that we have created something precious here, something that affects all of our lives and that has worked well enough to become a world model. The current dividend formula is unsustainable, but the original purposes Hammond advanced for the dividend must be protected.

The dividend must be linked to the fund. Without the dividend, we wouldn't have the money in the fund to solve our problems today. Voluntary contributions to the fund by the Legislature, in special appropriations and inflation-proofing, far exceed the mandatory money that went in because of the constitutional amendment. That happened because the fund is popular, and the fund is popular because of the dividend.

Walker has said linking the dividend to oil royalties will make us all support oil development. But getting Alaskans to support economic development has never been a problem. What I think would happen instead is that appropriations for the dividend would become an annual political game.

Finally, we should remember Hammond's primary purpose: to get our wealth to everyone, even subsistence hunters living way off the grid. The money has meant a lot to many of us over the years. It has helped put my kids through college. I'm sure everyone who isn't wealthy has a similar story.

It is a basic part of our economy, not a senseless freebie, and it's something we can be proud of.

In 1724, Cato, a philosopher who inspired our nation's founding fathers, wrote that, "An equality of estate will give an equality of power, and an equality of power is a commonwealth, or democracy."

Charles Wohlforth's column appears three times weekly. He is the author of more than 10 books, including as-told-to autobiographies of Walter Hickel, Vic Fischer and Dave Rose. Rose's book, which covers the history of the Alaska Permanent Fund, is titled "Saving for the Future." Email Wohlforth at cwohlforth@alaskadispatch.com.

The views expressed here are the writer's own and are not necessarily endorsed by Alaska Dispatch News, which welcomes a broad range of viewpoints. To submit a piece for consideration, email commentary@alaskadispatch.com.